Reform is essential, say business groups

PEAK business groups support increasing the GST or widening its base, but say it must be part of a broader tax reform package rather than a money-making exercise for the states.

A decade ago, the Senate amended the tax to exempt fresh food, health and education.

The federal government and the opposition have flatly ruled out any change but business groups said the tax would be worth increasing if the proceeds were used to cut inefficient state taxes and give corporate Australia a tax break.

The chief executive of the Australian Industry Group, Innes Willox, said any proposals that aimed at just increasing revenue ''should be treated with extreme caution''.

''These recent proposals are not proposals for tax reform; they are proposals to give more money to the states and territories,'' he said.

"AI Group agrees that Australia's tax system could be improved by lifting the share raised by more efficient taxes, including consumption taxes, and reducing the share raised by less efficient taxes, such as company tax, transaction taxes and other inefficient taxes levied by the states and territories. This is a debate we have to have to drive tax reform.''

The chief executive of the Business Council of Australia, Jennifer Westacott, concurred.

''Sooner or later, Australia will need to have a conversation about comprehensive tax reform to meet the needs of future generations. The GST will have to be part of that,'' she said.

''Comprehensive tax reform bears no resemblance to short term ad hoc tinkering; it requires a long term plan.''

The Assistant Treasurer, David Bradbury, said the Liberal premiers were not happy with just slashing spending on health and education. ''Now they want to hit them with the GST,'' he said.

To change the GST, the approval of all the states and the Commonwealth is required.